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See discussions, stats, and author profiles for this publication at: Effect of Working Capital Management on Firm Profitability: Empirical Evidence from Textiles Industry of Bangladesh Article · January 2014 CITATIONS 2 READS 416 2 authors: Some of the authors of this publication are also working on these related projects: Empowering Electronic Government Procurement (E-GP) of Bangladesh: Towards a More Transparent System View project corporate social responsibility and financial performance View project Md. Asad Uzzaman East Delta University 8 PUBLICATIONS 35 CITATIONS SEE PROFILE Tabassum Chowdhury East Delta University 3 PUBLICATIONS 31 CITATIONS SEE PROFILE All content following this page was uploaded by Tabassum Chowdhury on 06 November 2018. The user has requested enhancement of the downloaded file.
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Research Journal of Finance and Accounting ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.5, No.8, 2014 175 Effect of Working Capital Management on Firm Profitability: Empirical Evidence from Textiles Industry of Bangladesh. Md. Asaduzzaman 1* Tabassum Chowdhury 2 1,2 School of Business Administration, East Delta University (EDU),1267/A; Goshaildanga, Agrabad, Chittagong, Bangladesh. * E-mail of the corresponding author: [email protected] Abstract The main aim of this article is to examine the effect of working capital on profitability of Bangladeshi Textiles Companies. We collected data about a sample of 21 Bangladeshi Textiles Companies listed at the Chittagong Stock Exchange (CSE) from 2008 to 2012 and evaluated the data using multiple regression. The results reveal that working capital management and profitability is positively correlated in Bangladeshi Textiles Companies. The study further reveals that inventory of number of days, number of day’ s accounts receivables, and cash conversion period are positively correlated with a firm’s profitability but the numbers of days accounts payable are negatively correlated. The present study contributes to the existing stock of knowledge by examining the effect of working capital management on profitability in the context of an emerging capital market such as Bangladesh.. Keywords: Working capital management, Returns on assets, Accounts payable, Current ratio, Leverage. Cash Conversion Cycle. Introduction: Working capital management deals with managing short-term financing and investment decisions of the firm. However, working capital management also directly affects the liquidity of the company that is essential for the smooth running of a business unit (Sharma & Kumar, 2011). Efficiency in working capital management is vital, especially for production firms as it accounts for over half of its total assets and thereby directly affects the profitability and liquidity of the company (Raheman & Nasr, 2007).Sometimes, insufficient working capital management procedures may also lead to bankruptcy, even though their profitability may constantly be positive (Samiloglu & Demirgunes, 2008). Excessive levels of current assets can easily result in a firm’s realizing
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